UBS whistleblower case set to give way to state ruling on freedom of speech rights for workers

Elizabeth Kim

Published 8:57 pm, Friday, July 25, 2014

It is a case that has all the makings of an explosive behind-the-scenes story about the financial crisis: A former UBS employee who says he was fired for exposing that the firm had inflated the values of real estate assets, and a Swiss banking juggernaut that refutes the charge, but which also happened to be one of the bigger losers in the subprime mortgage market.

In pending state and federal lawsuits, Richard Trusz, a 58-year-old Glastonbury resident, claims he was unfairly fired from his job in August 2008 as a managing director and head of valuations at UBS Realty, a real estate investment division of UBS based in Hartford, after he repeatedly complained certain properties were overvalued and that UBS should return excess management fees that had resulted from the errors to investors, which included public pensions plans.

UBS, which has offices in Stamford, has filed a motion to dismiss the case. In a story about the lawsuit in 2008, Bloomberg News noted that UBS posted $48.6 billion in subprime mortgage losses, more than any other European bank.

After five years of winding its way through the legal process, the whistleblower lawsuit has gained attention not for its juicy allegations about financial wrongdoing but for serving as a pivotal test case that could have an impact on the rights of all workers in Connecticut.

As reported last week by the Wall Street Journal, the state Supreme Court is set to makea critical ruling in the case by deciding whether employers in the state have a right to discipline or fire employees for making statements while on the job that are related to matters of public concern, including allegations about illegal activity. The question stems from a 2006 U.S. Supreme Court decision that UBS has invoked as part of its defense that the company did not violate state law by firing Trusz. That ruling determined that public employees who speak out on matters related to their official job duties are not protected from retaliation because they are not "speaking as citizens for First Amendment purposes."

The state must now decide whether the 2006 federal ruling should apply to cases brought under Connecticut law. In other words, are employees in Connecticut who make statements "pursuant to their official duties" exempted from free speech protection provided under the state Constitution?

The case, which is not expected to be argued before the court until next year, has garnered interest from two prominent state advocacy groups.

A spokeswoman for the American Civil Liberties Union of Connecticut declined to comment on the case, saying that it was still preparing the legal brief.

The Connecticut Commission on Human Rights and Opportunities, which handles whistleblower retaliation complaints, argued in its application to file the amicus brief that a decision that restricted speech rights under the 1983 state statute would create "a chilling effect" in the workplace, and "the perception that whistleblowers cannot be afforded adequate protection by state agencies such as the CHRO."

A spokesman at UBS did not respond to a request for comment in time for publication. But in the July 22 story for The Journal, a spokeswoman for the bank was quoted as saying that Trusz's claims were "thoroughly looked into both internally and externally many years ago."

According to court documents, Trusz worked in an increasingly pressured environment as assets under management grew but staffing for the valuation unit was not expanded. Beginning in late 2007, he said he came across overstated values of certain properties, which resulted in UBS collecting higher management fees. The lawsuit said that although he raised the issue repeatedly with his supervisors, saying that they needed to disclose the errors to clients, they ignored him and eventually "began treating him as though he were a problem."

In an email, Steigman outlined the stakes of the current question before the state Supreme Court, saying the decision would impact whether whistleblower in the state could remain protected from or "whether employers in Connecticut will have more freedom to retaliate against employees who report wrongdoing simply because the employee's speech falls within the scope of his or her job duties."